7 Weeks of Changing World Dynamics

Today, we want to discuss the huge and growing dichotomy between the US market and the rest of the world.

The strong US economy continues to bode well for the S&P 500 and most of the other indices that have recently made new highs.  But before we move on to look at the rest of the world, and what those stock markets are telling us, there is another interesting thing occurring that holds some clues as to any transition in the US economy.

NOTE: Blue Line = S&P 500 Market Weighted / Orange Line = S&P 500 Equal Weighted

In the charts above, we see a definite loss of momentum since early February in Basic Materials, Energy, Industrials and Technology.  All of these sectors are very dependent on international economies.  So now, let's see how the international markets are acting in relation to the US since early February when our Asset Allocation Model raise a little caution flag.

In the chart above, you can see how the MSCI EAFE and All-Country World ex US indices have trended down a little bit or about flat since early February, while the S&P 500 has risen.  Of course, the old adage is that when the US catches a cold, the rest of the world catches the flu, but in this case it certainly appears that the rest of the world has caught the flu, while the US is still doing okay.

Don Hays

If you are a subscriber to HaysAdvisory.com, click here to read our recent reports.  If you would like to learn more about the research and commentary offered by Hays Advisory, click here.

Please see important disclosures at the bottom of this page.